Coronavirus fallout: Macquarie drops $500m raising

Macquarie Bank has killed off a $500 million raising due to ‘significantly changed’ market conditions.

Macquarie has ditched a $500m raising. Picture: Bob Finlayson.

Macquarie Bank has killed off a $500 million raising due to “significantly changed” market conditions, marking the latest in a string of dumped capital raising in the wake of the steepest bear market in history.

In a statement, Macquarie sought to calm investors, restating that the overall group’s “capital position is strong” with a $6bn capital surplus.

Listed equities manager Argo also said on Friday morning it would scrap a raising for its Global Listed Infrastructure fund and would refund customers. Last night National Australia Bank pulled the trigger on cancelling a $2 billion raising through a hybrid capital notes offer, after the listed hybrid market suffered its worst trading day on record.

Macquarie Bank said it would withdraw the offer for its $500m Capital Notes 2 raising, which was due to start trading on March 25 and which had already raised more than $400 million at a margin of 2.9 per cent.

Margins on hybrid notes have blown out after the ASX-listed capital notes suffered a torrid trading session on Monday.

Hybrid notes, or capital notes, are part debt and part equity and reward investors with a higher rate than bank bonds or term deposits, due to the risk the financial instruments carry. Hybrid payments can be suspended in the event of a crisis and the value of the investment can be converted into shares or written off to zero.

In the hierarchy of capital, depositors are the first to get their money back in the event of a bank going insolvent. Senior creditors and bond holders are then paid, followed by subordinated note holders, hybrid capital holders and, lastly, shareholders.

Macquarie Bank said it “took the decision to withdraw the offer in light of significantly changed market conditions in recent weeks” and that it would refund customers who had invested money “as soon as practicable”.

Argo Global Listed Infrastructure decided to bin its shareholder rights offer that would have raised up to $53.2m “in light of the rapidly changing coronavirus situation and the associated well-publicised, extremely volatile conditions in financial markets globally”.

The listed investment company, which invests in global infrastructure assets, had announced last month the one-for-six share entitlement offer for existing shareholders to take up their rights and hand over more money to the fund managers.

Argo Global Listed Infrastructure has around $300m invested in infrastructure assets.

On Friday Pengana Investment Management also dumped a $500 million raising for its Pengana Private Equity Trust.

“The current market volatility makes it impossible to conduct an orderly process and we do not believe that it is in the best interests of any parties involved to proceed with a raising under these circumstances,” the company said.

The Pengana trust is a collaboration with the Chicago-based Grosvenor Capital Management which invests in a portfolio of global private equity funds, and was seeking to raise up to $473m. The company also sought to calm investors, arguing the vehicle was “structured to benefit from such market conditions” and that the “severe market disruption is likely to be positive” for the private equity trust.

“This environment should present an abundance of well-priced investment opportunities that Grosvenor Capital Management will be particularly well placed to source and negotiate on attractive terms,” Pengana said.

On Thursday the Wilson Asset Management active fund decided it was in the best interests of shareholders to cancel its share purchase plan and return all amounts to shareholders who participated in the capital raising.

National Australia Bank late on Thursday pulled a $1.95bn hybrid raising due to heightened volatility amid a wider market rout.

NAB said it was withdrawing its Capital Notes 4 offer with market conditions changing substantially since it was launched on February 17.

“NAB recognises that market conditions have changed substantially since the offer was launched and that the ongoing market volatility would be likely to impact on the trading value of the NAB Capital Notes 4,” the bank said after the market closed.

The NAB notes were to start trading on March 24 at a 2.95 per cent margin with the proceeds of the offer to be used for general corporate purposes. Margins have jumped to 4.5 per cent in recent days due to distress in equity markets.

“NAB considers that the withdrawal of the offer is in the best interests of relevant stakeholders, including the large number of retail investors who had expressed interest in participating in the offer. Other options, including potential repricing, were not considered appropriate in the absence of an orderly market,” the bank said.

On Thursday, Sydney-based shadow bank and corporate lender Metrics Credit Partners dumped its own capital raising, refunding investors $344m following a massive raising shortfall following wild churning on junk bond markets.